Why are business expenses deductible from income, but someone’s basic living expenses aren’t deductible from personal income?
In: Economics
Because most businesses at in LLC, corp, etc.
It’s to incentives business growth.
Source: I have stake in a few businesses.
Somehow the huge majority of answers treats it as if it just two sides of the same thing, and that you as a person indeed get some deductions to compensate. But that is comparing very different things and not at the core of the question.
In the end it simply comes down to the meaning and intention. A business buys/pays stuff to do that: business. If you tax each of those then you are taxing them by the amount of money they move around, not by earnings.
A firm that handles large contracts of which it only gets 5% would pay 20 times as much taxes as a firm that does the very same stuff itself; yet both earn the same amount each year. That would not only be unfair but also make no sense for the society. We want the money to flow and those jobs to be handled. If it is easier, better or just cheaper to do it that specific way, what does anyone gain from making one of two ways much less profitable despite having the same outcome?
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